Want to avoid TDS on FD interest, rent? File Form 15G or 15H

Individual taxpayers have to mandatorily declare their earnings to the department on their own. You will feel the tax impact even at the time of receiving payments. Entities or persons making certain payments are obliged to deduct tax at source (TDS) before handing out the money. Examples are employers who pay salaries or banks that credit savings or fixed deposit interest to your account.

In case of salaried individuals, employers are responsible for calculating the TDS, based on the applicable I-T slab. However, for income other than salary, TDS is typically applied at a fixed rate, under the I-T Act, 1961.

This rate varies according to the nature and the source of income, as well as whether a Permanent Account Number (PAN) was provided or not.

It's important to note that the rate does not consider whether the income earned is taxable or not in hand of the recipient. In some cases, TDS comes into play only if the income crosses a certain threshold. For instance, TDS is to be deducted when the interest income earned exceeds Rs 40,000 and Rs 50,000 in a financial year for all resident assesses and resident senior citizens, respectively. Similarly, the threshold for TDS is Rs 5,000 in case of interest from corporate bonds.

However, in situations where TDS may be levied unnecessarily, or, in other words, where income is below the taxable limit, a taxpayer can utilise Form 15 G or 15 H to rectify this. Let’s read further to understand who needs to submit 15G and 15H, and when and how to file these documents.

Also read: ITR mistakes: Five return-filing errors that could trigger income tax notices

Who can use Form 15G/H?

Form 15 G and 15 H are for the same purpose but the applicability differs, based on the taxpayer’s age. Form 15G is for individuals below the age of 60 years with no taxable income, while Form 15H is for senior citizens (aged 60 years or more) with no taxable income.

Moreover, “it's essential to understand that Form 15G and Form 15H are applicable exclusively to 'residents,' rendering them ineligible for use by non-residents,” said Neeraj Agarwala, Partner, Nangia Andersen India.

What is form 15 G/H and its purpose?

Forms 15 G and 15 H are self-declaration forms. It is designed to prevent unnecessary TDS deductions on income that is below the taxable threshold or the basic exemption limit. The basic exemption limit under the old regime applicable in case of a resident individual below the age of 60 years for the financial year 2023-24 is Rs 2.5 lakh, and for resident individuals aged 60 years or above but below 80 years, the exemption limit is Rs 3 lakh.

For resident individuals aged 80 years or above, the exemption limit is Rs 5 lakh. For non-resident individuals, irrespective of the age of the individual, the exemption limit is Rs 2.5 lakh and for Hindu Undivided Family (HUF), the exemption limit is Rs 2.5 lakh. Under the new tax regime, the basic exemption limit is Rs 3 lakh for all age group for FY 2023-24.

However, for individuals, having interest income, the rules are a little different. “The condition of interest income exceeding the basic exemption limit pertains solely to Form 15G (those below 60 years) and does not apply to Form 15H (senior citizens). Form 15H can be submitted by senior citizens, even if their interest income surpasses the basic tax exemption threshold, provided their taxable income, after accounting for deductions, remains below the exemption limit,” said Agarwala.

So, that means if a senior citizen chooses to file income under the new tax regime, he can furnish form 15 H till Rs 7 lakh income for FY 2023-24, as there is no tax up to Rs 7 lakh under the new tax regime (Rs 5 lakh under the old regime) after taking into account rebate under Section 87A.

Where is Form 15G/H applicable or useful?

Form 15G/H is applicable for various income sources, such as interest income from banks, post offices, company deposits, and others. It can also be used for rental income, dividends, and more. However, it is crucial to note that it is not applicable for salary income.

“Generally, one feels that Form 15G/15H is only applicable in case of earnings in the form of interest from banks. However, it is applicable even for TDS on incomes like withdrawal of EPF before five years, interest on bank or post office deposits, TDS on rent, TDS on insurance commission and so on,” said Vivek Jalan, Partner, Tax Connect Advisory, a multi-disciplinary consultancy firm.

How to fill each section of Form 15G or 15H?

Form 15 G and 15 H are divided into two parts. Part 1 should be filled by the income recipient, while Part 2 is for the income payer. For example, when filing Form 15 G/H for interest income from a time deposit with the post office, the investor fills out the first part, and the post-office officials complete the second part.

When you start filling out the form, it is crucial to provide all information accurately. Begin by filling in your personal details such as name, PAN, date of birth (DOB), residential address, email ID, and contact number. Ensure that the name and DOB you provide match the details on your PAN.

Additionally, tick the appropriate box indicating your residential status. Remember, only resident individuals can benefit from Form 15G or H. Therefore, if you are a non-resident, there is no point in filing the form.

You are also required to mention the previous year (financial year) for which the declaration is being made. For example, if you are making the declaration for the current financial year, state the year as 2023-24.

Clearly state the details of the income for which you are making the declaration. For instance, specify if it is interest from a post office deposit or rental income.

You must also enter the total income from all sources that you have earned or will earn during the financial year. Additionally, separately declare the income amount for which you seek TDS exemption through this specific form. For example, if your total annual income from all sources is Rs 2.4 lakh and you have earned an estimated income of Rs 5,000 from a post office FD, mention Rs 2.45 lakh as the 'Estimated Total Income, including the estimated income earned on deposit(s)'. State Rs 5,000 separately in the space provided when submitting Form 15 to the post office.

Separate forms for every account/purpose

Keep in mind that you need to file a separate Form 15 with each entity and for each account. So, if you have income from fixed deposits from three banks and one from a post office, and rent from one housing property, but the total income is not taxable, you must fill out five Form 15s - three for the banks, and one each for the post office and the tenant.

Do not forget to provide account details, unique identification numbers of relevant investments, bank account information, deposit IDs, details of NSCs, life insurance policy numbers, and so on.

After completing the form, sign in the space provided for ‘Signature of the declarant’. Your signature indicates that the information provided is true and correct.

Although there is no specific deadline for submitting Form 15 G/H, it is advisable to do so well in advance, preferably in April or May of the financial year. This helps prevent any unnecessary TDS deductions. Always remember to review the latest guidelines and consult a tax advisor, if needed, to ensure submissions.